The Relationship between Reward Management and Organization Performance - Coursework Example

CRITICAL ASSESS: THE RELATIONSHIP BETWEEN REWARD MANAGEMENT AND ORGANIZATION PERFORMANCE THE RELATIONSHIP BETWEEN REWARD MANAGEMENT AND ORGANIZATION PERFORMANCE Insert name: Insert course code: Instructor’s name: 12 November, 2010. Introduction In the past twenty years, some development has been prepared in the examination of the relationship between HRM and Performance. However, progress has been modest on the balance. This is shown in the rather mixed and cautious conclusions from various writers. Some have indicated that the conceptual and empirical work relevant to the contribution of Human Resource Management (HRM) to organizational performance and competitive advantage has progressed enough to suggest the role of human resource is crucial. Similarly, Paauwe (2004) conclude that HRM activities produce the HRM outcomes which influence the performance of the firm. However, there are other writers who conclude that HR practices are weakly related to firm performance. Organizations have been carrying out several assessments to gauge the effectiveness of performance of employees. For the assessments of employee performance to be effective, it is important that performance of the group be measured as well as the performance of the individual. In this paper, we are going to analyze the relationship between the HRM activities and the employee performance. Performance assessment refers to the formal evaluation of an employee’s contribution to the organization. Evaluations of employee performance are used to make management decisions. These decisions include rewards, promotion, demotions as well as terminations and job assignments (Burke, and Cooper, 2005 p. 19). HRM as an enabler of strategic options (Paauwe’s view) According to the research conducted, the presumption of employees serves to focus unambiguous concentration on the aspects that assist in shaping the structures of HR practices in modern associations. This involves deviating from an elite apprehension with average procedures of performance, such as efficiency, sales and earnings, to a wider description that considers performance in terms of, for example, of elasticity/ agility and legality along with a variety of characteristics of worker well-being like approval, strain, health and safety, in addition to job security. The implementation of such a wider viewpoint demands correcting the at-times biased functionalist, administrative as well as unitarist move which has exemplified the greatest part of HRM and performance investigating of the last two decades. Thus some writers have viewed successful policy execution as the fundamental intervening variable linking the HR planning and performance. Particularly, rather than linking the HR strategy to a single market setting policy, they give emphasis to the connection between tactical business procedure and the HR planning. Paauwe views HRM as an enabler or facilitator for an entire variety of tactical options. This means that the HR architecture’s main objective is to develop human resources with a sufficient degree of flexibility or adaptability to implement a variety of strategic options. This calls the employees to very keen to learn as well as exhibit a prepared readiness to change as well as to be flexible and adaptable. This can only be possible if the needs of employees are well taken care of by the organization in addition to making sure that they are treated fairly and due consideration for their well-being. Thus the HRM should be founded on added value as well as moral values by combining economic with relational rationality. Merging economic with relational rationality refers to the establishment of sustainable as well as dependable relations with both interior and exterior participants founded on standards of justice and legality. The HRM should view the potential of employees as organizational assets. In other words, HRM should function successfully at three organizational levels: operational, managerial and strategic (long term). The transformation of HRM should result in the inclusion of functions at strategic level in addition to expanding managerial level activities. The role of human resources managers as enablers include: strategic business partner, employee advocate, diversity manager, maintainer of organizational culture, facilitator of organizational change, as well as internal consultant (Ferris, Rosen, and Barnum, 1995 p. 3). The majority of strategic HRM models make use of the chosen business strategy as a starting point and the try to establish the kind of HRM policies and practices that contribute to an increased economic performance. Paauwe’s model emphasizes on both economic and relational rationality, and focuses of HRM policies and practices that meet the criteria of both added value (in its economic meaning) as well as moral values such as fairness, legitimacy and sustainability. From the manager’s viewpoint, meeting the criteria of relational rationality implies treating the employees well. This results to lower absence, higher satisfaction, greater willingness to stay with the company and greater effort of the employee. These results indicate that one can run the business on a lower control cost base, as compared to companies with poor HRM system. But greater degree of trust and willingness to change implies a better starting point for implementing change as well as for implementing a range of strategies. In this way, ethical HRM must be sought in other ways, which acts as an enabling device for a range of strategic options. This is achieved through reward based performance management (Paauwe, 2004 p. 99). CONTRASTING VIEWPOINTS Workplace learning and strategic HRM Within the formulation of most of strategic HRM, employee development represents a fundamental lever that assists management to attain the substantive HRM objectives of commitment, flexibility as well as quality. Some writers state that employee development is a fundamental strategy for organizational growth and survival. Others have argued that investment in employee development has become a test of whether or not employers have adopted HRM model. In the recent past, several corporate leaders have been concerned with the perception of workplace learning. From managerial perspective, it is argued that an organization’s investment in workplace learning acts as a powerful signal of its intentions to develop its human assets and this can assist in developing the commitment to the organization instead of compliance (Bratton, and Gold, 2001 p. 61). HRM AND ORGANIZATIONAL PERFORMANCE It has been argued that the alignment between business strategy and HRM strategy improves the organizational performance as well as competitiveness. The main assumption is that committed workers are more productive. Beer et al. (1984 as stated in Bratton, and Gold, 2001) note that increased dedication can bring about more faithfulness as well as improved performance for the association, in addition to self-worth, self-respect, emotional participation, and individuality for the individual (1984, p. 19). We are going to analyze how organizational performance can be achieved through reward as well as through other related viewpoints. A CRITICAL REVIEW OF REWARD-BASED PERFORMANCE MANAGEMENT Monetary as well as non-monetary rewards are fundamental building blocks in the planning of performance management. Reward is highly critical for efficient performance of workers. Unproductive reward management or lack of sufficient and reasonable reward can cause other performance management strategies to crumple regardless of how competently these strategies are visualized and put into practice. Reward whose fundamental purpose is to stimulate and accomplish motivational requirements of employees, can turn out to be source of de-motivation if not appropriately dealt with. An unprofessionally visualized and poorly implemented reward strategy frequently gratifies a segment of employees at the cost of other segments of employees and sometimes at the cost of organizational health. A systematically evolved and applied reward strategy satisfies fundamental motivational requirements of employees and also enables employees to operate at higher motivational level (Bratton, and Gold, 2001 p. 263). Reward management is fundamental for achievement of performance management and has limitless prospective in encouraging workers to give their most excellent performance. Managing reward and leveraging it as a performance management strategy needs a holistic approach as well as proficient intelligence. Reward should be made with the individual and collective interests of workers in mind and should have an intimate relationship and alignment with strategic objectives of an organization. Organizations need to prioritize the reorientation of their reimbursement, incentive and acknowledgment schemes to be performance focused. These individual and piecemeal practices should also be brought under the umbrella of reward management. This implies that reward should be used and deployed as a powerful corporate strategy to obtain superior employee and organizational performance. Reward management in the context of performance management refers to an integrated reward system that makes sure equitable avenues to employees for fulfillment of their financial as well as non-financial requirements and recognition urge for their contribution to attainment of organizational goals. Importance of reward in performance management Reward is the key practice in the overall framework of performance management grand strategy. Reward strategy has two valuable properties in motivational behavior of employees. First, reward strategy has the quality of financial constituent of reward management which can satisfy workers’ lower level requirements like cleanliness factors or physiological and safety wants. Second, reward strategy has non-financial component of reward management comprising of recognition as well as job independence. This quality has a great potential of satisfying higher motivational factors like self-esteem and self-actualization factors. Employees can be stimulated to offer peak performance on their jobs combining their motivational needs structure with performance structure of an organization (Burke, Lake, and Paine, 2008 p. 290). Reward as source of Organizational Effectiveness Organizational effectiveness can be obtained only from high-performing employees. High-performing workers can make other resources perform highly. Reward is a proven and established method of motivating employees to perform exceedingly well. On the other hand, an inadequately planned and executed reward system can result to loss of self-esteem among workers and this gradually can lead to incompetence in organizations. Lessons of managerial fineness indicate that reward is one of the fundamental strategies that guarantee employee incentive soars on the higher levels on constant basis. An effective reward system goes hand in hand with effective organization (Kandula, 2006 p. 39). Reward as Medium between Organizational and Employers Reward is the widely known practice that brings organization and its employees together. Thus, successful management of reward is significant to both organizations along with its human resources. It is possible for reward to act as a medium. The top administration of an association can communicate the significance of performance through reward and it can as well lay the basis for sound people management. Human resources also tend to utilize reward as a channel to air their views and concerns on several performance related issues. Furthermore, reward strategy offers avenues and opportunities to all workers in an organization to fulfill their motivational needs (earn livelihood, acquire luxuries, secure future and gain recognition in society and pride concerning self-performance and achievement) to their satisfaction. An organization can change employees’ potential into performance by systematically tying performance of employees to gratification of their motivational requirements. The reward strategy assists workers to earn their livelihood as well as enriching their work experience and provides them motivational satisfaction at all levels (Kandula, 2006 p. 39). Reward can as well guide the organization as well as its workers to perform at their best. Reward encourages healthy competition and collaboration among workers to perform well, which leads to innovation in the pursuit of reward achievement. As the reward requirements of human resources transform from financial to a combination of financial-cum-non-financial to sheer non-financial, the performance contours also grow from simple skilled work to breakthrough innovations. This is the same as developing the requirements of workers, hence driving them to develop in work performances. In this way, reward can guide performance excellence in organizations. According to the research done on employee involvement, participation as well as empowerment, it has been established that performance excellence can come from employees who are entirely involved with organization (Armstrong, Murlis, and Group, 2007 p. 299). This involvement can only be obtained by creating opportunities for workers to involve themselves in organizational management. Among the potential sources that can be tapped for generating these avenues of involvement, reward is one of the very effective sources. It has been discovered that an unbiased and appropriate reward system can motivate employees to get concerned emotionally with an association in addition to shaping their professional journey in tandem with the organizational plans. An unprofessionally conceived and executed reward system can result to a lot of frustration as well as consequential distancing of human resources from the foundation of organizational functioning. On the other hand, an excellent reward system performs as a strategy for retention of talented employees. There in worker who would dare to quit job if the organization’s reward system is equitable and meets the requirements of the employee. Thus a well managed reward system creates the idea of security as well as the assurance in the minds of employees that in that organization, the right and wrong are easily distinguished and recognized. Thus, as factor of employee involvement, reward plays a great role in policy along with the practice of performance management (Loosemore, Dainty, and Lingard, 2003 p. 107). Reward as a source of Innovation Non-financial rewards generate a high degree of internal drive in workers to excel. The self determination to perform excellently creates avenues for innovation. Reward system has the ability to put into human beings the actualization drive. Thus properly planned and suitably focused non-financial rewards offer right recognition to workers and mature as a source of innovation. Furthermore, reward can be a source of competitiveness in an organization. From Paauwe’s point of view and others, is has been noted that; (a) all high-performing pay in addition to recognizing employee contribution well and (b) low-performing organizations have the type of unprofessional and blunt reward system that fails to recognize employee contributions. For organizations to attract great talents, it ought to have a strong reward system, since the reward system contributes to organizational performance in a measure of proportion. Organizational competitiveness emanates from sheer performance capacity of organizations. Thus, any organization that has intentions of strengthening its competitiveness should first focus on implementing an appropriate reward system (Heneman, 2002 p. 495). Other related viewpoints Culture-based performance management Due to the intangibility of culture, the term means different things to different people. Culture is defined, operationalized and institutionalized by people themselves with an intention of making progress and accomplishing organizational goals in a particular direction. This is attained through the means of creating values, morals, customs, assumptions and traditions. Culture in the context of performance management, refers to the shared strong work assumptions and norms that facilitate the peak performance of employees and organization. A positive and strong culture is the key to good performance and it is the primary way of doing things that clinches success factor. Culture has great potential and power to influence the performance course of organizations and people in particular. A constructive and robust culture can make even an average caliber person perform and achieve greatly, while negative and weak culture can de-motivate an outstanding worker to perform poorly and achieve little. Thus culture has a direct and active role in performance management (Kandula, 2006 p. 153). Culture defines the working environment. Strong and constructive culture contributes to the installation of positive work environment in which every employee feels comfortable to work. Where there are no well-defined values, customs and norms that guide people, those in weak organizational culture or a culture that is not performance oriented are prone to utilize their time and energies creating protection covers around them. The ultimate aim of every individual is to protect self-interest and ensure his or her existence in such a work environment. Culture may as well be a way of optimizing the resources of the organization. Performance orientation of individuals is reflected in the deployment of organizational resources. Managerial ethnicity plays a huge responsibility in deploying resources optimally to produce commodities and services. A matured and robust culture guides people to exhibit efficiency in exploitation of organizational resources both physical and intellectual (Morris, 1998 p. 100). A mature and strong culture produces an effective interdisciplinary. Peak performance of people can be achieved only through a collaborative and interdisciplinary effort as it is in the team-based performance management strategy. Ultimate effectiveness of teams and interdisciplinary work in contingent when there is the right culture. It is the human nature for people to live and perform in a collective manner, but it is the culture that motivates or de-motivates people to be individualistic. Culture provides unique language, guides interdisciplinary groups through norms and customs as well as governing them through values. Thus culture is the main constituent in performance management since it enhances effectiveness of interdisciplinary work. Culture is also one of the significant determinants of job satisfaction. People prefer organizations where employers are known to be best and where job satisfaction opportunities are fertile. Job satisfaction plays a great role in performance and organizational culture plays the decisive role in creating conditions for job satisfaction. An organizational culture that is strong and positive enables employees to transform to their potential into tangible performances through reinforcing the strengths and relieving the weaknesses. Functional, productive and emotional relationships are by-products of organizational culture (Micklitsch, and Ryan-Mityling, 1996 p. 18). Leadership-based performance management Leadership occupies a prominent position since the leaders have to lead the other six performance strategies. Leadership is significant because it sets the direction. Leadership helps in giving direction to the practice of performance management in organizations. Leaders analyze and set direction for organizations and then adopt a suitable performance management system for leading organizations through the direction so chosen. Lack of competent leadership can cause superficial performance management practice as well as every performance management strategy progressing in its own direction and at some point even grossly conflicting with other strategies. Leadership also defines the content of performance management. Leading organizations through performance management revolution is the main role of leaders. They are supposed to develop strategies, interventions as well as drivers that are compatible with the ever changing organizational reality. All performance management systems are dynamic and require constant appraisal and renewal in line with changing internal and external reality of organizations. Sound leadership is the basic necessity that is able to guide and make organizations adaptable with the perfect performance management content (Ehnert, 2009. P. 112). Conclusion There has been increasing interest in assessing the connections between HRM and development activities as well as business performance since the introduction of strategic HRM policies. I concur with Paauwe (2004), who argue that HRM should be facilitators of strategic options and that while human resource considerations should reflect business strategies, business strategies should as well reflect human resource considerations. According to Armstrong (2007), the HRM function should contribute to organizational effectiveness by adding value to its products and services as well as by contributing to competitive advantage. He argues that this can be achieved best by: (a) ensuring a positive quality and performance-oriented culture; (b) recruiting the right people, motivating them, ensuring their commitment to organizational values as well as deploying them in such a way that they contribute effectively to the organization; (c) ensuring that strategic HRM initiatives are treated as investments on which a proper return will be attained; and (d) delivering cost-effective personnel services (Loosemore, Dainty, and Lingard, 2003 p. 304). References: Armstrong, M., Murlis, H. and Group, H. 2007. Reward management: a handbook of remuneration strategy and practice. London, Kogan Page Publishers Bratton, J. and Gold, J.2001. Human Resource Management: Theory and Practice. UK, Routledge. Burke, R.J. and Cooper, C.L. 2005. Reinventing human resource management: challenges and new directions. UK, Routledge. Burke, W.W., Lake, D.G. and Paine J.W. 2008. Organization Change: A Comprehensive Reader. CA, John Wiley and Sons Ehnert, I. 2009. Sustainable Human Resource Management: A Conceptual and Exploratory Analysis from a Paradox Perspective. NY, Springer. Ferris, G.R., Rosen, S.D. and Barnum, D.T 1995. Handbook of human resource management. Oxford, Wiley-Blackwell. Heneman, R.L. 2002. “Strategic reward management: design, implementation, and evaluation”. IAP. Kandula 2006Performance Management. PHI Learning Pvt. Ltd. Loosemore, M., Dainty, A. and Lingard, H. 2003. Human resource management in construction projects: strategic and operational approaches. NY, Taylor & Francis. Micklitsch, C.N. and Ryan-Mityling, T.A. 1996. “Physician Performance Management: Tool for Survival and Success”. Englewood, Medical Group Management Assn. Morris, M.H. 1998. Entrepreneurial intensity: sustainable advantages for individuals, organizations, and societies. Westport, Greenwood Publishing Group. Paauwe J. 2004. HRM and performance: achieving long-term viability. Oxford, Oxford University Press. 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